Gen Z credit Scores Plummet, signaling Broader Economic Concerns
Washington D.C. – credit scores among Gen Z consumers are experiencing the steepest decline of any age group,according to a recent report from FICO,raising concerns about their financial futures and perhaps signaling broader economic headwinds. The average credit score for those aged 18-29 fell by the largest margin in the past year, a trend experts attribute to delayed financial milestones and increasing economic uncertainty.
This downturn isn’t simply a matter of young people having limited credit history. It reflects a growing struggle to manage debt and establish financial stability in a challenging economic landscape. The decline impacts Gen Z’s ability to secure loans for major purchases like homes and cars, potentially hindering wealth-building opportunities and exacerbating existing financial inequalities. Understanding how to build and maintain credit is now more crucial than ever for this generation.
Several factors are contributing to the trend. Job market uncertainties are prompting many young adults to postpone important financial commitments, delaying the establishment of credit. Simultaneously, a growing number are falling behind on existing payments.
Here’s how to navigate the current climate and build a strong credit foundation:
* Monitor Your Credit: Regularly checking your credit score is essential. Services like FICO, Experian and Credit Karma offer free access to credit scores and reports.
* prioritize Timely Payments: Payment history accounts for approximately 35% of your FICO score. Consistent, on-time payments – whether minimum or full balance – are paramount. setting up automatic payments can help avoid missed deadlines.
* Manage Credit Utilization: Keep your credit utilization – the amount of credit you’re using compared to your total credit limit – low. While avoiding debt is ideal, utilizing between 10% and 30% of your available credit is generally considered beneficial.
Anna Kleiber can be reached at akleiber@gannett.com.
